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China’s Macau Gambling Region: The Growth Opportunity

Wednesday, December 18th, 2013
By for Profit Confidential

China’s Macau Region a Good Bet for InvestorsSpain just rejected a massive $30.0-billion proposal from Las Vegas Sands Corp. (NYSE/LVS) to build a casino and entertainment resort near Madrid. The project would have been significant, with 12 hotels, six casinos, and many other amenities injecting some life into the stagnant country where the unemployment rate sits around 26%.

Now, the Spanish government had its reasons to turn down the deal; they centered largely on the associated activities that could surface when casinos and gambling arose. The same thing occurred in Toronto Canada, in which a $5.0-billion casino hotel project was also rejected.

But as is usually the case, a region’s loss is another area’s gain. Casino operators are always looking for growth and much of it has been focused on emerging markets outside of Las Vegas and the United States, in areas such as Asia and, more specifically, China where there is incredible wealth being created. But whether or not you like the casino industry and for whatever reasons, there will always be regions around the world that will welcome multibillion-dollar investments.

At this point, the top destination for casinos is Asia, or more specifically, the Macau region in China, which the Chinese government has supported as a region for gambling. China has designated economic development zones across the country and Macau has been designated a special administrative region for legalized gambling to attract the newfound wealth. (Read “China’s Expected Baby Boom a Boon for U.S. Business.”)

Make no mistake about it: Macau could eventually become the most sought-after region in the world for casino operators.

After its rejection in Spain, Las Vegas Sands shifted its capital and sights to adding more casino space in Macau. Having been to Macau, China, I have to say it’s truly a place to visit. The region combines the old world charm of this former Portuguese colony and the modern push by China to develop the “Vegas of the Orient” and attract money.

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In the region, you have the old established casino areas, but there has been a major push over the recent years to build new colossal casinos and hotels in the Cotai Strip in Macau.

If you want to bet on the growth in Macau, and the Cotai Strip in particular, the two key players to watch are Las Vegas Sands and China-based Galaxy Entertainment Group Limited (OTC/GXYEY).

Las Vegas Sands, via its Sands China Ltd. subsidiary, currently owns four properties in the Cotai Strip, where it attracts tens of millions of visitors. The growth for Las Vegas Sands has been impressive there, with revenues in the billions per quarter.

Las Vegas Sands Corp. NYSE Chart

Chart courtesy of www.StockCharts.com

Galaxy Entertainment is also an aggressive player in the region, with two core properties—Galaxy Macau and StarWorld Hotel and Casino—currently operating in the area. The company is set for more expansion at these existing developments.

Two other players with a smaller presence in Macau, China may be more familiar names: Wynn Resorts, Limited (NASDAQ/WYNN) and MGM Resorts International (NYSE/MGM).

If I was a betting man, I would put my money on Macau as the big-growth buying opportunity in the casino space for the next decade.

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George Leong - Financial Planner, ConsultantGeorge Leong, B. Comm. is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services. Add George Leong to your Google+ circles